The Chief Economist's Note Archives - Capital Economics

Category: The Chief Economist’s Note

In UK PM race, tax cuts are a distraction from economic challenges

Posted by Neil Shearing | Category : The Chief Economist's Note.

This is not a grown-up race for the Conservative party leadership. A grown-up race would involve grown-up debate around the economic policies needed for the UK to secure sustainable growth in its future. Instead, we have the unedifying spectacle of two candidates battling almost exclusively on who can deliver the biggest tax cuts and when. … Continue reading “In UK PM race, tax cuts are a distraction from economic challenges”

The ECB’s got 99 problems but a weak euro ain’t one

Posted by Neil Shearing | Category : The Chief Economist's Note.

Next week marks the tenth anniversary of Mario Draghi’s pledge to do “whatever it takes” to save the euro. That was the line-in-the-sand moment that paved the way for policies that eventually brought an end to the crisis which had engulfed the euro-zone. A decade later, the single currency again finds itself in the crosshairs, … Continue reading “The ECB’s got 99 problems but a weak euro ain’t one”

From deglobalisation to outright fracturing – the global economy’s post-pandemic, post-Ukraine reality

Posted by Neil Shearing | Category : The Chief Economist's Note.

The one-two punch of the pandemic and war in Ukraine has fundamentally shifted the narrative around globalisation. In 2019, the research prepared for our annual ‘Spotlight’ event explained why we thought globalisation had peaked and how the risks of deglobalisation were being underappreciated. While many of the risks we warned about have crystallised, the era-defining … Continue reading “From deglobalisation to outright fracturing – the global economy’s post-pandemic, post-Ukraine reality”

Housing downturn will deepen – but this isn’t 2008

Posted by Neil Shearing | Category : The Chief Economist's Note.

Central bankers giveth and central bankers taketh away. It was their low interest rate policies which helped fuel an extraordinary – and extraordinarily global – rise in house prices. As a generational rise in inflation brings that low-rate era to a rapid close, our earlier warning that housing markets would prove most vulnerable to policy … Continue reading “Housing downturn will deepen – but this isn’t 2008”

Japan will find it harder than China to buck the global tightening trend

Posted by Neil Shearing | Category : The Chief Economist's Note.

This is being called a global monetary tightening cycle – but it’s not strictly “global”. While 41 of the 50 central banks under our coverage have raised rates so far, and we expect others to join them – most notably the European Central Bank – the People’s Bank of China (PBOC) and Bank of Japan … Continue reading “Japan will find it harder than China to buck the global tightening trend”

In race back to neutral the biggest traps lie in the euro-zone

Posted by Neil Shearing | Category : The Chief Economist's Note.

The Federal Reserve dominated markets last week, briefing a super-sized hike in interest rates to the press on Monday and duly delivering it at the conclusion of Wednesday’s FOMC meeting. It was the most prominent sign yet of the markedly hawkish shift in recent weeks by global central banks. Policymakers from Australia to India have … Continue reading “In race back to neutral the biggest traps lie in the euro-zone”

Global food supply shock raises inflation stakes

Posted by Neil Shearing | Category : The Chief Economist's Note.

Energy prices are dominating the headlines, but the current inflationary surge is also about what’s happening with global food supplies. We estimate that higher food prices have accounted for about one quarter of the increase in inflation in advanced economies over the past year, and around one-third of the increase in inflation in emerging economies. Many … Continue reading “Global food supply shock raises inflation stakes”

The not-so-good, the bad and the ugly: the outlook for the world’s big three economies

Posted by Neil Shearing | Category : The Chief Economist's Note.

We’ve spent a long time arguing that the global economy faces a more difficult outlook than most expect. The consensus is now moving towards our view as evidence of weakness mounts. But, amid the pervasive gloom, it’s worth noting that the three largest economic blocs – the US, euro-zone and China – face challenges that … Continue reading “The not-so-good, the bad and the ugly: the outlook for the world’s big three economies”

Whipping inflation doesn’t necessarily require a recession – but some may not get a choice

Posted by Neil Shearing | Category : The Chief Economist's Note.

A debate is raging among market participants about whether inflation has accelerated to such an extent that a recession has now become necessary in order to bring it back down.  As we explained in a piece published last week, the answer depends to a large extent on how much of the rise in inflation has … Continue reading “Whipping inflation doesn’t necessarily require a recession – but some may not get a choice”

In this new age of uncertainty, central banks should double down on inflation targeting

Posted by Neil Shearing | Category : The Chief Economist's Note.

25 years ago this month the Bank of England was granted operational independence by the then-Chancellor Gordon Brown. Uncomfortably for current members of the Monetary Policy Committee, the anniversary coincides with a new set of forecasts by the Bank’s staff showing that UK inflation is on track to hit 10% by the end of this … Continue reading “In this new age of uncertainty, central banks should double down on inflation targeting”